Bradley Partner Bruce Ely Quoted in Law360 on New Partnership “Pull-In” Option

Bradley attorney Bruce Ely was quoted in Law360 on very recent amendments to the consolidated partnership audit regime that allow partners to pay taxes through the partnership without filing amended individual income tax returns, which could greatly reduce administrative burdens on both partners and the IRS. The Consolidated Appropriations Act, P.L. 115-141, codifies the creation of a so-called "pull-in" election, which allows individual partners in the reviewed year of the audit not to file amended returns if the IRS determines a partnership owes an imputed underpayment.

Ely said he was pleasantly surprised by the changes contained in the technical corrections portion of the Act and that he believed the result is good because it gives a partnership more options when deciding how to approach an audit by the IRS under the new rules.

The pull-in procedure will allow the partnership to file a composite return for all or a number of its partners, and pay the tax on its behalf or charge it to the partners in some way, he explained, which will be useful both for businesses and for the IRS.

“I think it’s going to be useful because it will apply most logically to these massive hedge funds and MLPs that have thousands upon thousands of partners,” Ely said.

The IRS will also like this change almost as much as hedge funds and MLPs because it will make the calculation of the imputed underpayment easier and allow an audit defense to go forward much more smoothly, he added.

“The fact that most of the long-awaited technical corrections from the 2016 bill were incorporated into the Consolidated Appropriations Act — and we now have a third procedure to mitigate the tax pain — should signal the tax practitioner community that the partnership audit rules are here to stay,” Ely said. “There seems to be little appetite in Congress now to either delay them or repeal them.”

The complete article, “Partnership ‘Pull-In’ Option Eases Burdens Of Audit Regime,” appeared in Law360 on March 28, 2018.